Tuesday, 1 January 2019

Investment Review - December 2018

And so this is Christmas, and how have we done ?  

Firstly, the combined portfolio spreadsheet updated on Monday 31 December 2018.

Share / Fund Purchases in the Period
During the market pullback in October, I bought into HFEL.L at 342p.  This is another dividend play intended to strengthen the passive income stream by reaching out beyond traditional western shores.

I'd also been looking for some healthcare exposure for a while and, again in October, I bought into the £470m L&G Global Health & Pharmaceuticals Index Trust fund, at 80.4p.  I'm holding the accumulation version of the L&G fund, because it's basically a growth fund with a relatively low dividend anyway.  The healthcare alternatives I'd considered all seemed to be too heavily invested in US-listed stocks.  Even this L&G fund has 66% in US markets, but that's nothing compared to the investment trust giant in the sector, WWH.L which has 90%.  Another popular investment trust, BBH.L, is 94% invested in US-listed companies.

And in the final few days of December, I bought into RGL.L at 92.7p.  Yet another dividend play, this becomes the second REIT in the portfolio.

Share / Fund Sales in the Period
After the purchases, and to get some of my cash position back, I sold my entire holdings of TSCO.L and STAN.L towards the end of December, at 193p and 597p respectively.  These sales represented a significant cash loss, but their prices had gone nowhere but down in the four years I'd held them in the SIPP, and with very little received in the way of dividends as compensation.

I also sold out of my corporate bond holding in National Grid (NG1Q.L) at 126p, for a 20% gain over the purchase price from 6 years ago.  During the holding period, I'd received a further 10% of the purchase price back as biannual coupons.

Passive Income Index
It's been a record year for passive income, with the share and fund purchases I made in late 2017 and early 2018 starting to pay dividends, literally !

The index at the end of the year stands at 352.1, compared with 196.6 at the end of 2017, which represents an increase in actual cash terms of 61% in 2018.   

In my spreadsheets, I usually compare the monthly growth / loss of the portfolio to that of the FTSE 100 index.  It might not be the most appropriate benchmark, but it's convenient, widely-quoted, and quite international.

Casting our minds back a full twelve months and, after last year's great Santa Claus rally, the last trading day of 2017 saw a new record close for the FTSE 100 at 7,688.  It continued to charge upwards in early January 2018 until it peaked at 7,778, but then came the first slump of the year which eventually bottomed out at 6,922 in late March.   

Thereafter, a very rapid recovery set new record closing highs, with a 2018 (and the current all-time) peak of 7,877 reached on 22 May.  It generally held up well until the late summer, and then took another nosedive touching new intra-year lows on the way down.  It closed at 6,728 on 31 December 2018 and so over the full year the FTSE 100 index lost 12.5% and, allowing say 4% for dividends, resulted in an annual total return of around -8.5%.

Portfolio Returns
Overall, the combined portfolio has held up reasonably well so far during the market turndown.  My total return for 2018 was -1.5%.   It's never good to be losing money, but this year's markets have shown the value of diversification within the portfolio, and also how useful dividends can be in holding up total returns.  

But even with the regular addition of fresh funds, I'm currently back to the same portfolio valuation first reached in May 2018, so the recent slump has cost me over half a year of growth towards my targets.

As a comparison, portfolio total returns for the last five years are as follows :-

2014, +4.3%
2015, -3.5%
2016, +15.7%
2017, +4.3
2018, -1.5%

So I'm not exacting setting the world alight here, but at least I can sleep at night without worrying too much about the finances ...

Who knows where the markets will go from here, but I have still have some free cash in the portfolio for bargain-hunting if the falls should continue, plus I haven't yet loaded all of my 2018-19 ISA allowance.

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